Page 55 - DCOM206_COST_ACCOUNTING_II

Particulars
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[A] Sales @ ` 8
2,08,000
2,24,000
2,56,000 8,80,000
1,92,000
—
36,000
[B] Opening Stock @ ` 6 Quarter I Quarter II Quarter III Quarter IV Total
—
12,000
[C] Cost of Production@ ` 6* 1,56,000 1,80,000 1,44,000 1,80,000 6,60,000
[D] A + C 1,56,000 1,80,000 1,80,000 1,92,000 6,60,000
[E] Closing Stock@ ` 6 — 36,000 12,000 — —
[F] Cost of Sales [Actual] D – E 1,56,000 1,44,000 1,68,000 1,92,000 6,60,000
Cost Accounting – II
[G] Profit before adjustment of under or 52,000 48,000 56,000 64,000 2,20,000
over absorbed fixed cost [A – F]
Add: Over absorbed fixed overheads** — 8,000 — 8,000 16,000
Notes Less: Under absorbed fixed overheads*** — — 4,000 — 4,000
Profit 52,000 56,000 52,000 72,000 2,32,000

* The total cost of production is ` 6, which, consists of ` 4 variable cost, and ` 2 as fixed cost per unit at
the normal volume of production. The opening stock cost of production and closing stock values are
computed by taking these figures.
** Over absorption of fixed overheads is computed by multiplying the excess production than the normal
volume by the fixed overheads per unit i.e. ` 2.
*** Under absorption of overheads is computed by multiplying the units produced below the normal
volume of production by the fixed overheads per unit i.e. ` 2.
Reconciliation of Profit
Particulars Quarter I Quarter II Quarter III Quarter IV Total
` ` ` ` `
Profit as per absorption costing 52,000 56,000 52,000 72,000 2,32,000
Less: Higher fixed cost in closing stock 12,000 — — 12,000
[6000 × ` 2]
Add: Higher fixed cost in opening stock* 8,000 4,000 12,000
Profit as per marginal costing 52,000 44,000 60,000 76,000 2,32,000

* In quarter III: [6000 – 2000] × ` 2 = ` 8,000, Quarter IV = 2,000 × ` 2 = ` 4,000
Problem 2:
For a particular product, the following cost data is given:

Per unit (`)
Selling Price 20
Variable cost 12
Fixed cost 4
Normal production 52000 units

For the four consecutive periods, the following additional data are given:

Period 1 Period 2 Period 3 Period 4 Total
Units Units Units Units Units
Opening stock – - 12000 4000 -
Production 52000 60000 48000 60000 220000
Sales 52000 48000 56000 64000 220000
Closing stock - 12000 4000 - -

Prepare a statement showing the profit for different periods under both marginal costing method
& absorption costing method.

Solution:
Under Marginal Costing
Particulars Period 1 Period 2 Period 3 Period 4 Total
(`) (`) (`) (`) (`)
Sales – (i) 1040000 960000 1120000 1280000 4400000
Opening stock - - 144000 48000 -
Production 624000 720000 576000 720000 2640000
Total 624000 720000 720000 768000 2640000
Contd...
Less: Closing stock - 144000 48000 -
Cost of goods Sold (ii) 624000 576000 672000 768000 2640000
LOVELY PROFESSIONAL UNIVERSITY384000
50 Contribution (i) – (ii) 416000 448000 512000 1760000
Less: Fixed Cost 52000 units @ 4 208000 208000 208000 208000 832000
Profit 208000 176000 240000 304000 928000